ABSTRACT Diabetic kidney disease (DKD) is the most common single cause of end stage kidney disease in the USA. Disruption of physiological insulin signaling occurs in glomeruli and podocytes in DKD, and podocyte-specific deficiency of insulin receptor (IR) recapitulates many features of DKD. Two isoforms of the IR have been described that either lack (IRA) or contain (IRB) the 12 amino acids encoded by exon 11. IRA signals primarily through p70S6K while IRB signals primarily through Akt, an important survival factor in podocytes. The cause of altered insulin signaling observed in podocytes in DKD as well as the relative contribution of IRA and IRB signaling to podocyte function remains to be established. Podocytes are dependent on functional lipid rafts for proper signaling and survival, and lipid rafts affect primarily IRB signaling. Although the raft-associated protein caveolin-1 (cav-1) binds IR and modulates IR-dependent signaling, little is known about how lipid rafts influence IR specific isoform signaling. We have identified sphingomyelin-phosphodiesterase-acid-like-3b (SMPDL3b) as a novel enzyme expressed in podocyte lipid rafts and upregulated in DKD. Our preliminary data show that SMPDL3b differentially affects IRA/IRB signaling by disrupting the interaction of IRB with Cav1 and facilitating IRA binding to Cav1. The SMPDL3b protein contains a phosphodiesterase-like domain that allows SMPDL3b to form complexes with Cav1 and a phosphatase-like domain that converts ceramide-1-phosphate (C1P) to ceramide. However, the mechanisms linking SMPDL3b overexpression to podocyte altered IR signaling in DKD remain unknown. Based on these observations, we hypothesize that SMPDL3b suppresses IRB/Cav1 interaction by converting C1P to ceramide, and that podocyte-specific SMPDL3b deletion or C1P replacement are sufficient to prevent podocyte injury in DKD. We will determine in Aim 1 if SMPDL3b differentially affects IRA/IRB localization and function in podocyte lipid rafts. Aim 2 will investigate if SMPDL3b deficiency protects from podocyte injury in experimental mouse models of DKD and in Aim 3, we will explore if C1P replacement is sufficient to restore IR signaling and to protect from DKD. This proposal is significant, as it will help our understanding of the mechanisms by which sphingolipids may regulate insulin receptor (IR) signaling in podocytes as well as other cell types. This proposal is innovative as it may support the development of a C1P lipid replacement strategy for the cure of patients affected by DKD.